Assume that Grace Company presently produces and sells 20,000 units of product A which represents only 80% of its normal capacity of 25,000 units. Its regular selling price is P50 per unit and its manufacturing, selling and administrative costs are as follows: Materials P10 Labor 12 Variable OH 8 Fixed OH 60,000 Variable selling and administrative 7 Fixed selling and administrative 40,000 Grace Company received an order from a provincial distributor for 3,000 units. The customer asks for a special discount of 30%. It is expected that the company will incur no additional selling and administrative costs. Should Grace company accept the special order?
Assume that Grace Company presently produces and sells 20,000 units of product A which represents only 80% of its normal capacity of 25,000 units. Its regular selling price is P50 per unit and its manufacturing, selling and administrative costs are as follows: Materials P10 Labor 12 Variable OH 8 Fixed OH 60,000 Variable selling and administrative 7 Fixed selling and administrative 40,000 Grace Company received an order from a provincial distributor for 3,000 units. The customer asks for a special discount of 30%. It is expected that the company will incur no additional selling and administrative costs. Should Grace company accept the special order?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Example 1
Assume that Grace Company presently produces and sells 20,000 units of product A which represents only 80% of its normal capacity of 25,000 units. Its regular selling price is P50 per unit and its manufacturing, selling and administrative costs are as follows:
Materials P10
Labor 12
Variable OH 8
Fixed OH 60,000
Variable selling and administrative 7
Fixed selling and administrative 40,000
Grace Company received an order from a provincial distributor for 3,000 units. The customer asks for a special discount of 30%. It is expected that the company will incur no additional selling and administrative costs.
Should Grace company accept the special order?
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